“Seed Ranch Flavor Co. started as a hot sauce in 2017. But, we knew from the beginning that it was going to be a flavor company, not just a hot sauce and condiments company. But then the pandemic hit right as we were looking at other product lines we wanted. And the reality is that bootstrapping from 2017 to 2022 meant that we needed to have some cash flow; we couldn’t run in 17 different directions.”

“We pretty much focused on markets, local grocery, and staying in the Rocky Mountain region, with a few exceptions here and there. We didn’t have the balance sheet to really support a national rollout or anything.”

“I was about to launch popcorn, but then the pandemic hit. And that’s when you end up thinking ‘Is this going to tank my company? Is this going to make it take off?’”

“We doubled 2017-2018, then ‘18 to ‘19, ‘19 to ‘20, and then slightly less than doubled ‘20 to ‘21.”

“I’ve been plant-based for seven years now. During the pandemic, I developed the recipe for GrownAs* Mac & Cheese.”

“I knew a co-packer that could do our mac and cheese locally, and we started cranking out a couple thousand boxes and selling those. We did a seed and raised a seed round in May of 2022 to really invest in some branding and invest in scale. We then found a larger co-packer—you know, fully automated—and that’s where GrownAs* really started growing.”

“If you talk to entrepreneurs, it’s always about the peaks and valleys where you’re rich, then you’re broke, then you’re rich… And you get a check, then you lose a check, then you get a check… etc. You know, that’s a supply chain that’s growing on a thin margin, growing competitively.”

“I think people need to look at the math to really understand how difficult it is to scale a CPG brand / food brand.”

“For most categories, there’s a ceiling for what people are willing to pay. So, you have to price accordingly, right? There’s a lot of people screaming on LinkedIn about ‘Oh, you’ve got to have a 70% to 90% margin.’ And that’s great, but it’s not going to happen for most CPG brands. A 50% margin has always been our target.”

“Let’s use some simple math for the sake of an easy example. Say you’re going to sell your product to a distributor for $4, and it costs $2 to make. So, there’s a 50% margin. The distributor is going to mark it up when they sell it to the retailer—let’s call it a dollar, because even if it’s a cost plus relationship, you’re going to end up getting chargebacks and paying for that extra. So, it’s going to be a 20% markup. So now you’re at five bucks to the retailer. Then the retailer is going to want 40% to 50%.”

“With the retailer’s markup, now the price of your product in the shop is $9. So, you went from $2 to $9. Then, take into account that most retailers are going to take a free fill on that first order. Say you’re in a free fill to 100 stores. You will never see that money again, and you’re going to pay the equivalent of what the distributor is going to charge the retailer, not your cost.”

“Again, we said the distributor is going to sell it to the retailer for $5. Let's call it a case per SKU per store. Ten units in a case, right? So now we're assuming 1000 units per SKU per store. Let's say you've got three SKUs. That's 3000 units that you're getting charged back at $5. So now you're 15 grand out from day one. You've taken that mortgage essentially out on the retailer house and you're going to start chipping away at it.”

“This is where so many people hammer on around velocity and same store sales. You're going to have, say, three months before you have to start promo-ing again to keep chipping away, right? So year one, you may not even be marginally profitable on that store. It really starts in year two.”

“And when you write those numbers out and you forecast it out for a year or two years, it starts to make sense just why cash flow is so difficult, why financing is so important, and why omnichannel is absolutely pivotal to any CPG brand. Because if you can find other channels other than retail where you can win without free fill, maybe without promo so early on, it can make cash flow much more manageable. For a lot of companies, that's in-person events, whether it be markets, gift shows, food service, Amazon DTC, or these kinds of things.”

“We're setting that foundation of the pyramid right now incrementally, and then we can say yes to more risky and kind of top line growth opportunities as we build that omnichannel base and as we get those margins and velocities consistent.”

“I think as an industry, what's really interesting is watching the customer value-driven products start taking over stores where they weren’t before. Take Whole Foods, for example. The 365 brand is everywhere in Whole Foods. Yes, you still find smaller brands, but every time there's a brand that is successful, you're going to see that 365 or the store brand coming in.”

“Now that you're seeing Whole Foods, you're seeing Sprouts, other retailers across the board really focusing on that private label side, that means less shelf space for independent brands. So you really have to have an incremental value add to the category in order to get on the shelf and get people to pay attention.”

“And then price wise, people are still spending right now, which I think is great. But understanding the credit card debt crisis that we have in this country, for instance, is important. The potential for that to pop I think is pretty significant. And then there’s the potential for a 2024 where whether it's a true recession or just kind of an economic slowdown or flattening, where we've got a high interest rate environment and people are likely to cut back on spending. I'm bullish on what we're up to.”

“So first of all, get on LinkedIn and start connecting with people. You don't have to be a content creator on LinkedIn—I think you can interact with people without really ever posting a whole lot, just finding those niches on LinkedIn.”

“The next one I would say is the Startup CPG Slack. It’s an amazing resource. There are a ton of service providers on there, so every time I've posted something like, “Hey, I'm looking for an email agency, the ones that we've pitched to are just too expensive,” I get around 35 DMs in the next 24 hours. It's also a great resource for connecting with other founders.”

“And then from a podcast standpoint, I love CPG Vibes. I just think it's a great opportunity to see and hear the real story from some other folks. You can also just listen to it in the car in the background, while you go get a workout in, or while you take a walk. I also want to recommend Jordan Buckner’s podcast, Startup to Scale. I did one of those with him that I think is going to be airing pretty soon.”